Autos Boosting Palladium Demand

By Frank Holmes|Oct 15, 2010, 6:14 PM

We talked earlier this week about the long-term prospects for copper prices but palladium has been the star performer of metals this year. As of yesterday, palladium is up 47 percent in 2010 to $602.75 an ounce.
Palladium has benefited from a rebound in global auto production, which is expected to jump 20 percent from 2009 levels this year. Palladium is used in catalytic converters for automobiles. The average catalyst contains 4 grams of palladium or platinum. With China building between 15-20 million new automobiles a year, much more of the metals will be needed.

Auto production in China has receded in recent months from its peak earlier this year but remains three times higher than it was just a few years ago. In addition, Macquarie says there is a regulatory bias in China toward regular gasoline vehicles over diesel. Gasoline engines use more palladium for catalyts while diesel engines rely more on platinum. We’ve also seen a rebound in the U.S. auto market. Production has bounced off of 2009 lows and a report from Experian this week shows new-car registrations rose for the third-consecutive quarter in June. Car registrations were up 13.5 percent from the same period last year.
Like copper, palladium has solid supply/demand fundamentals. Total demand is expected to increase 43 percent from 2009-2015, nearly all of that coming from the automobile industry. Meanwhile, mine supply is only expected to rise by 2 percent over the same time period.

If demand for automobiles continues to rise in China, the U.S. and other emerging markets such as Brazil, Russia and India, it’s possible we could see a large deficit in supply during the next couple of years.

PALLADIUM

Palladium is a chemical element with the chemical symbol Pd and an atomic number of 46. Palladium is a rare and lustrous silvery-white metal that was discovered in 1803 by William Hyde Wollaston, who named it after the asteroid Pallas, which in turn, was named after the epithet of the Greek goddess Athena, acquired by her when she slew Pallas.
Palladium, along with platinum, rhodium, ruthenium, iridium and osmium form a group of elements referred to as the platinum group metals (PGMs). Platinum group metals share similar chemical properties, but palladium has the lowest melting point and is the least dense of these precious metals.
The unique properties of palladium and other platinum group metals account for their widespread use. One in four goods manufactured today either contain platinum group metals or had platinum group metals play a key role during their manufacturing process.^[2] Over half of the supply of palladium and its congener platinum goes into catalytic converters, which convert up to 90% of harmful gases from auto exhaust (hydrocarbons, carbon monoxide and nitrogen oxide) into less harmful substances (nitrogen, carbon dioxide and water vapor). Palladium is found in many electronics including computers, mobile phones, multi-layer ceramic capacitors, component plating, low voltage electrical contacts, and SED/OLED/LCD televisions. Palladium is also used in dentistry, medicine, hydrogen purification, chemical applications, and groundwater treatment. Palladium plays a key role in the technology used for fuel cells, which combines hydrogen and oxygen to produce electricity, heat and water.
Ore deposits of palladium and other platinum group metals are rare, and the most extensive deposits have been found in the norite belt of the Bushveld Igneous Complex in the Transvaal in South Africa, the Stillwater Complex in Montana, United States, the Sudbury District of Ontario, Canada, and the Norilsk Complex in Russia. In addition to mining, recycling is also a source of palladium, mostly from scrapped catalytic converters. The numerous applications and limited supply sources of palladium result in palladium drawing considerable investment interest.